Go Dante Yap v Bank Austria Creditanstalt AG [2010] SGHC 220

Case Number : Suit No 424 of 2003

Decision Date : 05 August 2010

Tribunal/Court : High Court

Coram : Andrew Ang J

Counsel Name(s) : Kannan Ramesh, Ng Ka Luon Eddee, See Chern Yang and Poon Ho Yen Claudia(Tan Kok Quan Partnership) for the plaintiff; Christopher Anand Daniel andNicholas Jayaraj s/o Narayanan (Advocatus Law LLP) for the defendant.

Parties : Go Dante Yap — Bank Austria Creditanstalt AG

Banking

[LawNet Editorial Note: The appeal to this decision in Civil Appeal No 156 of 2010 was dismissed bythe Court of Appeal on 08 February 2011. See [2011] SGCA 39.]

5 August 2010 Judgment reserved.

Andrew Ang J:

Introduction

1 The plaintiff, Dante Yap Go, is a businessman and a national of the Philippines. The defendant,Bank Austria Creditanstalt AG, is an Austrian-incorporated bank which formerly operated branches inHong Kong and Singapore. This action was brought by the plaintiff against the defendant in respect oflosses suffered on the plaintiff’s investment portfolio following the Asian financial crisis of 1997 and1998.

2 On 3 June 1997, the plaintiff had opened two investment accounts with the defendant’s privatebanking department: one with the defendant’s Hong Kong branch (“the Hong Kong account”) and theother with its Singapore branch (“the Singapore account”). A credit facility of up to US$5m wasgranted by the defendant to the plaintiff via the Hong Kong account. Both accounts were handled byone Winnifred Natasha Tong Ching Laude (“Ms Ching”) who was, at that time, a vice-president in thedefendant’s Hong Kong branch. Subsequently, a number of investments in emerging markets debtinstruments were acquired under the Singapore account, some of which were financed using loansthat were drawn down from the credit facility tied to the Hong Kong account.

3 A few of these investments were US Dollar (“USD”) denominated Indonesian corporate bonds orshort-term notes that were issued by the Bakrie Group of companies (“the Bakrie Group”) and anothercompany called Polysindo. These Indonesian notes were acquired in the month of July 1997.

4 What transpired within the following months in parts of Asia were events that became knownas the Asian financial crisis. During this period of financial crisis, the value of the Indonesian rupiahdepreciated substantially against the USD and, as a result, Indonesian companies that had borrowedin USD were suddenly faced with higher costs in servicing their debts. A number of Indonesiancompanies, one of them being the Bakrie Group, ended up defaulting on their bonds.

5 Also acquired under the Singapore account were Rossiyskiy Kredit 10.25% Interest Notes (“theRossiyskiy Notes”) purchased on 25 September 2007. The Rossiyskiy Notes, also denominated in USD,were issued by a Russian bank, Rossiyskiy Kredit Bank, and were linked to GosudarstvenniyeKratkosrochniye Beskuponniye Obligatsio (“GKOs”), which were short-term rouble-denominated bondsissued by the Russian Government. The Asian financial crisis triggered a knock-on effect in the globaleconomy and, as a result, the Russian Government devalued the rouble against the USD and defaultedon its GKOs. Faced with circumstances similar to those faced by the Indonesian companies, RossiyskiyKredit Bank, too, ended up defaulting on its GKO-linked Rossiyskiy Notes.

6 After five years or so had lapsed, the plaintiff commenced this action against the defendant on2 May 2003 claiming for, inter alia, losses suffered on the abovementioned investments. As thedefendant had ceased its operations in Asia sometime in October 2001, the plaintiff applied for andwas granted leave on 16 May 2003 to serve the writ of summons out of jurisdiction at the defendant’sregistered place of business in Austria. However, the Singapore Consulate in Austria encountereddifficulties in effecting service on the defendant, and it was only on 2 August 2005, more than twoyears after the action was commenced, that the defendant was finally served with the writ ofsummons.

7 The trial was then conducted over three tranches: from 14 to 23 May 2007 (“the firsttranche”); from 25 to 27 February 2008 (“the second tranche”); and from 7 to 8 July 2008 (“the thirdtranche”). By the time parties appeared before me for the first tranche of the trial, a good ten yearsor so had already elapsed since the happening of the events that the witnesses were asked to testifyon. This had a significant bearing on the quality of the evidence given by the witnesses of fact aswill become apparent later in this judgment.

The plaintiff’s claims

8 The plaintiff claims that a total of 16 investments purchased under his Singapore account andthe loans drawn down from his Hong Kong account to finance those investments were not authorisedby him (“the unauthorised investments claim”).

9 The plaintiff then claims, in the alternative, that even if those investments and loans had beenproperly authorised, the defendant had breached its duty owed to the plaintiff, in contract and/ortort, by failing to advise him that it was imprudent to have maintained the portfolio that he washolding during the period of the Asian financial crisis (“the advisory claim”).

The witnesses

Witnesses of fact

10 A total of six witnesses of fact testified and gave evidence. Four of them – the plaintiff, MsChing, Dr Michael Potyka (“Dr Potyka”), and Philippe Yin (“Yin”) – were cross-examined before me,whereas the remaining two – Eric Chin Yeung Yin (“Chin”) and Ms Lily Yeung (“Ms Yeung”) – wereexamined in October 2009 before an examiner appointed by the Hong Kong courts and they both gaveevidence in the form of depositions.

The plaintiff

11 The plaintiff struck me as an especially unreliable witness over the four and a half days that hewas cross-examined on the witness stand.

12 I observed that he would often ask for questions to be repeated needlessly despite having thebenefit of those questions being displayed on a monitor screen in front of him. I also noticed that theplaintiff would take far too long to give direct answers or to agree to matters that would have beenfairly obvious to any reasonable person. There were also occasions on which he would embellish hisevidence by introducing new explanations for the first time whenever he felt it was advantageous todo so. Furthermore, some of his responses were simply incredible. Once, he adamantly persisted thathe had not seen the words “Hong Kong Branch” which appeared, in large font, not only in the titleheading but also directly above his signature in a written agreement of which he had initialled everysingle page.

13 I also took note of another incident which further diminished the plaintiff’s credibility in my view.On that occasion, counsel for the plaintiff, Mr Kannan Ramesh, was cross-examining Ms Ching inrelation to a faxed document which the plaintiff had claimed was sent by him. The plaintiff hadinsisted that the handwriting on the fax note was his and that the name in the “From” field was hisname. Notwithstanding the poor quality of the copy produced in court, I could discern that the namein the field appeared to be unlike the plaintiff’s name. It was only later, after it had become clear fromthe transmission report, that the fax was sent from a phone line in Singapore and could not havebeen sent from him that the plaintiff then performed a complete turnabout and conceded that thehandwriting was actually not his.

Ms Ching

14 Ms Ching’s testimony was of obvious importance because the plaintiff had conducted hisdealings with the defendant primarily through her. Ms Ching who had since returned to the Philippinesto be a homemaker was, initially, reluctant to appear and the defendant had to take out anapplication for Ms Ching to be examined by way of foreign deposition in the Philippines. Ultimately,Ms Ching agreed to testify on the defendant’s behalf and appeared before this court for the first andthird tranches of the trial for cross-examination.

15 On the witness stand, Ms Ching was oftentimes defensive, given the nature of the plaintiff’sallegations against her. As a result, some of her answers came across as being unnecessarily defiantand were somewhat unreasonable on occasion. She took issue with Mr Ramesh every time he usedthe word “advice” to describe her recommendations to the plaintiff. However, despite her failure attimes to recall events or give precise answers, I did not think that she was lying on the essentialpoint that the investments were authorised.

Dr Potyka

16 The defendant had originally scheduled for one Paul Francis Giles (“Giles”) to appear as awitness on its behalf. Giles was the head of the defendant’s Hong Kong branch at the material timeand was in charge of overseeing the defendant’s private banking services for its Asian clients from1997 until 2000. His testimony was important because he had corresponded directly with the plaintiffin the aftermath of the Asian financial crisis and was also present at a number of meetings with theplaintiff. However, about a month before the trial, the defendant lost contact with Giles. Leave wassubsequently granted for the defendant to add Dr Potyka as a replacement.

17 At the material time in 1997, Dr Potyka was the head of the defendant’s main legal departmentbased in Austria and he only became involved in this matter in early 2006. As a result, he had nopersonal knowledge of the events that took place. Dr Potyka was cross-examined before me duringthe first tranche of the trial and was also present throughout the proceedings as the defendant’srepresentative.

Yin

18 Yin was the senior vice-president “Operations” of the defendant at the material time between1997 and 1998 and he appeared before me during the second tranche of the trial. He gave evidenceas to the defendant’s internal procedures relating to the documenting and recording of instructions.Like Dr Potyka, Yin had no personal knowledge of the events that took place between the plaintiff andthe defendant.

Ms Yeung

19 Ms Yeung was an assistant vice-president with the defendant at the material times andprovided operational support to Ms Ching and other banking officers. Although Ms Yeung’s positionwith the defendant would naturally have made her an important witness, the evidence that resultedfrom her deposition, however, was of limited value as she conceded that she could only vaguelyremember the events that had occurred nearly 12 years ago.

Chin

20 For the same reason, the evidence of Chin was of hardly any assistance. In fact, Chin’srecollection of his time with the defendant was even worse than that of Ms Yeung’s. Chin wasemployed by the defendant from 1992 to 2002 and worked at the securities trading desk at thematerial times.

Giles (who did not appear)

21 After the first tranche of the trial, I granted leave to the defendant, who had resumed contactwith Mr Giles, to call Giles to testify during the second tranche. However, after he had prepared hisaffidavit of evidence-in-chief (“AEIC”), Giles had a sudden change of heart and decided not to appearfor cross-examination. The defendant then took out an application to have Giles attend anexamination in Hong Kong but could not serve the necessary documents on him. As the evidence inGiles’ AEIC was untested by cross-examination, I disallowed it from being admitted.

Expert witnesses

22 I heard expert evidence from three witnesses: a private banker, Ms Ng Bee Nah (“Ms Ng”) whoappeared on behalf of the plaintiff, and two consultants, Dr Cesar Saldana (“Dr Saldana”) for theplaintiff and Mr Roman Scott (“Mr Scott”) for the defendant. Much of the expert evidence related tothe key events of the Asian financial crisis and the scope of a private bank’s duty to give investmentadvice during the crisis. I found most of the expert evidence rather unnecessary because most of thematters covered were either matters of common sense or were matters of which one could not speakwith much certainty.

Dr Saldana

23 Dr Saldana was commissioned by the Asian Development Bank to write the country paper on thePhilippines as part of a study of the Asian financial crisis and the corporate governance issuesunderlying the financial crisis. He was also involved in preparing the consolidated report for fivecountries affected by the Asian financial crisis: the Philippines, Indonesia, Malaysia, Thailand andKorea.

Ms Ng

24 Ms Ng was the vice-president of a major European bank and has experience in leading andmanaging one of its private banking units since 2005. She was previously an assistant vice-presidentof the private banking department of another European bank from the year 2002. She gave opinionevidence in relation to private banking practices in Singapore and, more specifically, what wasexpected of a private banker during the Asian financial crisis.

Mr Scott

25 Mr Scott was the managing director of a bank advisory and private equity company based inSingapore. He was formerly a senior partner in the Singapore office of a global management consultingfirm and has 20 years of experience in working with the private banking industry. He also served as anadvisor to the Indonesian Government’s key crisis resolution agency and four other Indonesian banksin connection with the Asian financial crisis.

The evidence

The introduction of Ms Ching to the plaintiff

26 Sometime in early 1997, the plaintiff had heard rumours that an “Asian financial crisis” waslooming and that the Philippine peso might be devalued. Up till then, the plaintiff had 140 million pesosdeposited with two Philippine banks and also some USD-denominated funds deposited in an accountwith the Swiss Bank Corporation (later to become “UBS”). After hearing those rumours, the plaintiffmade the decision to transfer his funds out of the peso-denominated accounts.

27 Around the same time, Ms Ching was recommended to the plaintiff by one Jose Qua on thebasis that she had given him advice on a number of currency investments which had proven helpful.After the plaintiff was told that Ms Ching was also the daughter of Alfredo Ching, a reputedbusinessman whom the plaintiff was acquainted with, the plaintiff agreed to meet her.

28 A meeting between the three of them was arranged and this first meeting was held at the ParkLane Hotel in Hong Kong. Ms Ching had arrived fully prepared to do business and, during the meeting,she showed the plaintiff worksheets containing a number of peso-denominated bonds. However, herrecommendations were rejected by the plaintiff because of his concern that the peso was about tobe devalued.

The subsequent meetings

29 The second meeting was held in Manila. In her written statement, Ms Ching claimed that theplaintiff had told her at the second meeting that he wanted to open an investment account but hadno specific investments in mind yet. She claimed also that in one of their meetings (she could notrecall which one) the plaintiff had told her that he wanted an investment return of 10 to 12% abovethe rates offered by money-market investments and that he was interested in investing in USD-denominated emerging markets debt. Apparently, the plaintiff then expressed an interest in bondsissued by conglomerates in Indonesia, Brazil and Russia after some discussion. Ms Ching also providedhim with a worksheet illustrating how he could use a leveraging structure to finance his investments.Thereafter, Ms Ching continued to liaise with the plaintiff and prepared the necessary documentationfor the plaintiff to open an investment account with the defendant.

30 The plaintiff’s evidence differed markedly from Ms Ching’s in substance and in detail. He allegedthat, during the second meeting, Ms Ching had represented to him that the defendant had totalknowledge of the market and could tell between safe and risky investments. Furthermore, he claimed

that Ms Ching had told him that one of the advantages of investing with a professional bank such asthe defendant was that he would not lose any of his money and his capital would be preserved evenin a worst-case scenario.

The opening of the investment accounts

31 As alluded to at [2] above, the plaintiff opened two accounts with the defendanton 3 June 1997. It was agreed that the plaintiff’s investments were to be held in the Singaporeaccount because he was concerned about the handover of Hong Kong to the People’s Republic ofChina and did not want his investments to be held in Hong Kong. The Hong Kong account was openedbecause the defendant required that a Hong Kong-domiciled account be used if the plaintiff wished toobtain a loan facility from the defendant. The Singapore account was numbered 88XXX whereas theHong Kong account was numbered 85XXX.

32 For the Singapore account, the plaintiff signed the following agreements:

(a) an Account Opening and Custodian Agreement (“AOCA”), dated 3 June 1997;

(b) a Discretionary Investment Management Agreement (“DIMA”), dated 3 June 1997;

(c) an Investment Authority Instruction (“IAI”), dated 3 June 1997;

(d) a Hold Mail Instruction (“HMI”), dated 3 June 1997; and

(e) a Notice of Assignment and Charge, dated 25 June 1997.

33 For the Hong Kong account, the plaintiff signed the following agreements:

(a) an AOCA, dated 3 June 1997;

(b) an IAI, dated 3 June 1997;

(c) an Investment Management Agreement (“IMA”), dated 25 June1997;

(d) a Loan Facility Letter (“LFL”), dated 25 June 1997; and

(e) a Charge Agreement, dated 25 June 1997.

The relevant contractual documents for the investment accounts

The contractual documents for the Singapore account

34 The contractual documents for the Singapore account are governed by Singapore law. The firstagreement that was executed for the Singapore account was the AOCA, which was a standard termagreement for opening private bank accounts that would be used to hold funds or investments. In theplaintiff’s case, he successfully negotiated for the annual account fee payable to the defendant (in cl16.01 of the AOCA) to be reduced from the standard rate of 1% of total asset value per annum to0.25% of the same.

35 The DIMA was a standard term agreement which has to be read with the AOCA. It granted thedefendant the power and discretion to trade in securities on behalf of a client using the client’sinvestment account without the need for the client’s specific authorisation. In banking parlance, such

an investment account was termed a “discretionary account”. However, because the plaintiff wantedto have the final say in deciding what investments to purchase, the parties executed the IAI toachieve that.

36 In the course of the trial, two nearly identical documents were referred to as the IAI. Thisinitially caused a bit of confusion. However, it was clear from either document alone that thedefendant was required to obtain the plaintiff’s prior approval before it could buy or sell any securitythrough the plaintiff’s investment account; thereby achieving the intended effect of revoking thedefendant’s discretion under the DIMA.

37 The HMI simply ensured that all correspondence addressed to the plaintiff would be held by thedefendant until the plaintiff collected them personally. The plaintiff had executed the HMI for reasonsof privacy and out of fear that the value of his assets would be disclosed to other persons.

The contractual documents for the Hong Kong account

38 The Hong Kong account functioned essentially as a credit facility account with the defendantwhich would allow the plaintiff to draw down loans to fund the purchases of investments in hisSingapore account. The contractual documents for the Hong Kong account are governed by HongKong law.

The plaintiff remits funds into the Singapore account

39 From the period of 11 June 1997 until 14 November 1997, the plaintiff remitted funds into theSingapore account on 13 separate occasions. The reason for remitting his funds in tranches wasbecause the plaintiff had to wait for the various investments in his two Philippine bank accounts tomature and also because he wanted to obtain the most favourable exchange rates before convertingthe peso-denominated funds into USD.

40 By 22 July 1997, the plaintiff had already remitted a sum of US$4,009,873 into the Singaporeaccount. Thereafter, the plaintiff ceased to remit funds into the Singapore account for a few monthsuntil November 1997 when the plaintiff remitted another sum of US$999,916 into the Singaporeaccount. In total, the plaintiff remitted a sum of US$5,009,789 or approximately US$5m into theSingapore account from the period of June to November 1997.

The plaintiff’s risk appetite

41 The plaintiff claimed that, during one of his meetings with Ms Ching before the accounts wereopened, he had told Ms Ching that he wanted to preserve his investment capital and was onlyinterested in conservative investments such as money market placements, blue chip stocks and bondswith the highest credit-rating of “AAA” (“the conservative investment mandate”).

42 Ms Ching, however, claimed otherwise. She maintained that the plaintiff had told her that hewanted an investment return of 10 to 12% above the rates offered by money-market investments(see [29] above), although she could not recall the precise moment when the plaintiff had told herthat. Such a rate of return would have classified the plaintiff as a high-risk investor, according toMs Ching.

43 At the trial, Ms Ching acknowledged that a client’s risk appetite was an important piece ofinformation that had to be clearly documented in the client’s file. However, when asked fordocumentary evidence of the plaintiff’s risk appetite, Ms Ching could only point to her handwritten

minutes of a meeting with the plaintiff in June 1997. She could not recall whether she was required,as a matter of protocol, to officially record the plaintiff’s assessed risk appetite in his client file, whichI found troubling as I would have thought an assessment of a client’s risk appetite was an essentialcomponent in the client’s investment profile and any prudent bank would have ensured that suchinformation was properly documented to protect its own position.

The monthly meetings between the plaintiff and Ms Ching

44 Ms Ching met with the plaintiff in Manila at least once a month from August to November 1997,and once in January 1998 in what parties have termed their “monthly meetings”. At every one ofthose monthly meetings, Ms Ching would show the plaintiff four account statements which reflectedthe updated status of the Singapore account. The four statements were a portfolio analysisstatement, a security analysis statement, a currency analysis statement and a money market analysisstatement.

45 The portfolio analysis statement is a summary of all the assets and liabilities held in theSingapore account and it furnishes a percentage breakdown of the assets according to type, eg,bonds, equities, warrants, options, money markets and metals. The currency analysis statement is abreakdown of all the assets and liabilities according to currency whereas the security analysis andmoney market analysis statements are lists of all the purchased securities and money marketplacements for the Singapore account.

The plaintiff’s instructions to the defendant

46 In the course of her dealings with the plaintiff, Ms Ching would receive instructions from theplaintiff either by phone or personally at their monthly meetings.

47 At the trial, the defendant produced a number of Ms Ching’s handwritten minutes of themeetings as evidence of the plaintiff’s instructions during those meetings. I noted that herhandwritten minutes tended to be very brief and almost never indicated the exact dates of thosemeetings with the plaintiff. Even Yin conceded that this was unusual and not in accordance withprocedure. Furthermore, Ms Ching admitted that she failed to keep a complete record of all themeetings that had taken place with the plaintiff. Astonishingly, for the period of 11 months fromJune 1997 to April 1998, Ms Ching recorded minutes for only five of her meetings with the plaintiff.She also confirmed that she kept no other record of the plaintiff’s instructions but could remembertaking rough notes which may have been thrown away.

48 As for the instructions that were given by phone, the defendant inexplicably failed to produceany evidence of the phone conversations between the plaintiff and the defendant. The initialexplanation given was that no tape recordings were found because no recordings had actually beenmade. This contradicted, however, Yin’s oral testimony that all phone conversations between thedefendant and its clients were tape recorded as a matter of practice. It was at a later stage of hiscross-examination that Yin suddenly remembered that the defendant would dispose of tape recordingsafter a period of six months as a matter of practice. Dr Potyka was equally incapable of shedding anylight as to why no tape recordings were produced. He claimed that all the plaintiff’s client files hadbeen transferred to the defendant’s head office in Vienna sometime in late 2001 after the defendant’sAsian branches were closed down, and that whatever had been produced in court was everythingthat had been given to him.

49 The internal documents produced by the defendant as evidence of the plaintiff’s instructionswere mainly Client Settlement Tickets and Internal Drawdown Notices. However, the Client Settlement

Ticket does not reflect the client’s instructions because it was a document that was generated afterthe completion of a trade by the defendant’s Securities Trading Desk and thus only confirms that atransaction had occurred. Similarly, the other internal documents were not true records of theplaintiff’s instructions because they were generated within the organisation after a client’sinstructions had already been received.

The investments that were acquired through the Singapore account

The allegedly unauthorised investments

50 The plaintiff alleges that the following 16 investments that were purchased in his Singaporeaccount were unauthorised:

(a) Polysindo Notes, having a nominal value of US$1m, purchased on 16 July 1997 at the priceof US$950,000 (95.05% of nominal value), effective on 21 July 1997 and maturing on 13 February1998;

(b) Barito Pacific Lumber PN, having a nominal value of US$1m, purchased on 17 July 1997 atthe price of US$974,000 (97.4% of nominal value), effective on 22 July 1997 and maturing on20 November 1997;

(c) Banco do Brazil 8.375% Notes, having a nominal value of US$500,000, purchasedon 17 July 1997 at the price of US$502,250 (100.45% of nominal value) plus US$5,001.76(accrued interest), the total of which was US$507,251.76, effective on 22 July 1997 andmaturing on 15 June 1998;

(d) Bakrie International Finance FRN, having a nominal value of US$2m, purchased on 18 July1997 at the price of US$1,990,000 (99.5% of the nominal value) plus US$35,533.33 (accruedinterest), the total of which was US$2,025,533.33, and subject to a call/put option at 100% ofthe nominal value exercisable on 5 November 1998, effective on 23 July 1997 and maturing on5 November 1999;

(e) Banco do Brazil 8.375% Notes, having a nominal value of US$250,750, purchased on22 July 1997 at the price of US$249,750 (99.9% of the nominal value) plus US$2,675.35 (accruedinterest), the total of which was US$252,425.35, effective on 25 July 1997 and maturing on15 June 2002;

(f) BBA Creditanstalt Bank Ltd 8.125% eight-year Notes, having a nominal value of US$1m,purchased on 23 July 1997 at the price of US$1,000,500 (100.05% of the nominal value),effective on 25 July 1997 and maturing on 25 July 2005;

(g) Bakrie Brothers one-year PN, having a nominal value of US$1.5m, purchased on25 July 1997 at the price of US$1,389,750 (92.65% of the nominal value), effective on6 August 1997 and maturing on 6 August 1998;

(h) BBA Creditanstalt Bank Ltd 8.125% eight-year Notes, purchased on 25 July 1997 at theprice of US$500,000 (the nominal value) plus US$564.24 (accrued interest), the total of whichwas US$500,564.24, effective on 30 July 1997 and maturing on 25 July 2005;

(i) Bank of Boston Brazil 8% Notes, having the nominal value of US$550,000, purchased on29 July 1997 at the price of US$552,090 (100.38% of the nominal value) plus US$244.44 (accrued

interest), the total of which was US$552,334.44, effective on 4 August 1997 and maturing on2 February 1998;

(j) BBA Creditanstalt Bank Ltd ECP, having a nominal value US$500,000, purchased on16 September 1997 at the price of US$469,050 (93.81% of the nominal value), effective on19 September 1997 and maturing on 7 August 1998;

(k) Rossiyskiy Notes, having a nominal value of US$250,000, purchased on 25 September 1997at the price of US$247,250 (98.9% of the nominal value), effective on 29 September 1997 andmaturing on 29 September 2000;

(l) InkomBank Zero ECP, having a nominal value of US$500,000, purchased on25 September 1997 at the price of US$478,350 (95.67% of the nominal value), effective on1 October 1997 and maturing on 30 March 1998;

(m) InkomBank Zero ECP, having a nominal value of US$600,000, purchased on14 October 1997 at the price of US$558,600 (93.1% of the nominal value), effective on17 October 1997 and maturing on 20 July 1998;

(n) Banco BCN Barclays 8% (StepUp) Notes, purchased on 15 October 1997 at the price ofUS$500,000 (the nominal value) plus US$555.56 (accrued interest), the total of which wasUS$500,555.56, effective on 20 October 1997 and maturing on 15 October 2005;

(o) InkomBank Zero ECP, having a nominal value of US$200,000, purchased on21 October 1997 at the price of US$186,800 (93.4% of the nominal value), effective on24 October 1997 and maturing on 20 July 1998; and

(p) Banco do Brazil 9.375% Notes, having a nominal value of US$300,000, purchased on24 October 1997 at the price of US$299,625 (99.875% of the nominal value) plus US$10,859.38(accrued interest), of which the total was US$310,484.38, effective on 28 October 1997 andmaturing on 15 June 2007.

The authorised investments

51 In addition to the above 16 disputed investments, a number of equity investments werepurchased in the Singapore account. The plaintiff does not dispute that these equity investmentswere indeed properly authorised by him:

(a) 500 Hewlett-Packard Co shares, purchased on 24 July 1997 at the price of US$33,330;

(b) 600 McDonald’s Corp shares, purchased on 25 July 1997 at the price of US$30,906;

(c) 500 Pfizer Inc shares, purchased on 25 July 1997 at the price of US$30,300;

(d) 400 American Express shares, purchased on 25 July 1997 at the price of US$31,512; and

(e) 500 Motorola Inc shares, purchased on 24 September 1997 at the price of US$34,087.50.

52 The plaintiff also authorised an investment in Banco Inter-Atlantico ECD, which was purchasedon 17 July 1998 at US$481,750 (96.35% of the nominal value of US$500,000), effective on21 July 1998 and maturing on 31 December 1998. This note was redeemed in full at maturity.

The allegedly unauthorised loans that were drawn down from the Hong Kong account

53 Some of the investments were financed in part by loans that were drawn down from the HongKong account:

(a) A loan of US$760,400 for 72 days, from 21 July 1997 to 1 October 1997, at the interestrate of 6.78125% per annum, which was used to pay part of the purchase price of the PolysindoNotes (item (a) of [50] above);

(b) A loan of US$779,200 for 71 days, from 22 July 1997 to 1 October 1997, at the interestrate of 6.78125% per annum, which was used to pay part of the purchase price of the BaritoPacific Lumber PN (item (b) of [50] above);

(c) A loan of US$1,620,426.66 for 70 days, from 23 July 1997 to 1 October 1997, at theinterest rate of 6.78125% per annum, which was used to pay part of the purchase price of theBakrie International Finance FRN (item (d) of [50] above);

(d) A loan of US$209,387.31 for 58 days, from 4 August 1997 to 1 October 1997, at theinterest rate of 6.6875% per annum, which was used to pay part of the purchase price of theBank of Boston Brazil 8% Notes (item (i) of [50] above);

(e) A loan of US$1,389,750 for 56 days, from 6 August 1997 to 1 October 1997, at theinterest rate of 6.6875% per annum, which was used to pay the entire purchase price of theBakrie Brothers one-year PN (item (g) of [50] above);

(f) A loan of US$558,600 for 34 days, from 17 October 1997 to 20 November 1997, at theinterest rate of 6.4375% per annum, which was used to pay the entire purchase price of theInkomBank Zero ECP (item (m) of [50] above);

(g) A loan of US$500,555.56 for 31 days, from 20 October 1997 to 20 November 1997, at theinterest rate of 6.4375% per annum, which was used to pay the entire purchase price of theBanco BCN Barclays 8% (StepUp) Notes (item (n) of [50] above);

(h) A loan of US$154,131.10 for 27 days, from 24 October 1997 to 20 November 1997, at theinterest rate of 6.4375% per annum, which was used to pay part of the purchase price of theInkomBank Zero ECP (item (o) at [50] above); and

(i) A loan of US$310,484.38 for 7 days, from 28 October 1997 to 4 November 1997, at theinterest rate of 6.4375% per annum, which was used to pay the entire purchase price of theBanco do Brazil 9.375% Notes (item (p) of [50] above).

The opening of another account

54 The plaintiff was also the settlor of a trust called Sugarland Trust, of which the trustee wasUBS Trustees (Jersey) Ltd (“UBST”) and the beneficiaries were his son, his daughter and the plaintiffhimself. On 23 October 1997, a third account was opened with the defendant, under the name ofCrown Court Holdings Ltd, which was a wholly-owned subsidiary of UBST. This account was numbered88XXX (“the Corporate account”).

The Asian financial crisis and the investments

55 As already alluded to at [4] above, the stock and bond markets were severely affected by theAsian financial crisis and the value of some of the above investments dropped drastically, particularlythe Bakrie International Finance FRN and the Bakrie Brothers one-year PN (items (d) and (g) of [50]above; collectively, the “Bakrie Notes”), which eventually became so depressed that there waseffectively no market for them. However, the value of some of the investments eventually turnedaround and increased sufficiently such that they were redeemed fully with interest at maturity. Theoutcomes of the 16 allegedly unauthorised investments are listed below.

56 Five out of the 16 investments were sold before maturity:

(a) Banco do Brazil 8.375% Notes (items (c) and (e) of [50] above) sold on10 September 1997 for US$759,250;

(b) BBA Creditanstalt Bank Ltd 8.125% eight-year Notes (items (f) and (g) of [50] above) soldon 13 October 1997 for US$1,515,421.88; and

(c) Banco do Brazil 9.375% Notes (item (p) of [50] above) sold on 16 July 1998 forUS$284,212.50.

57 Six of the 16 investments were redeemed at maturity:

(a) Barito Pacific Lumber PN (item (b) of [50] above) redeemed on 20 November 1997;

(b) Bank of Boston Brazil 8% Notes (item (i) of [50] above) redeemed on 2 February 1998;

(c) Polysindo Notes (item (a) of [50] above) redeemed on 13 February 1998;

(d) InkomBank Zero ECP (item (l) of [50] above) redeemed on 30 March 1998; and

(e) InkomBank Zero ECP (items (m) and (o) of [50] above) redeemed on 20 July 1998.

58 Two of the 16 investments were subsequently transferred to the Corporate account sometimein April 1998 because, according to the plaintiff, they were both profitable and the Corporate accountwas “better protected” under the management of UBST (see [54] above):

(a) BBA Creditanstalt Bank Ltd ECP (item (j) of [50] above); and

(b) Banco BCN Barclays 8% (StepUp) Notes (item (n) of [50] above).

59 As of August 1998, besides the Banco Inter-Atlantico ECD bought in July 1998 (see [52]above), the only investments that remained in the Singapore account were the following:

(a) Bakrie Notes (items (4) and (7) of [50] above); and

(b) Rossiyskiy Notes (item (k) of [50] above).

The plaintiff repays part of the loans

60 In September 1997, the plaintiff promised to remit US$1m to the defendant to repay part of theoutstanding loans, which was carried out by the plaintiff on 13 and 14 November 1997. The plaintiff’sreason for making payment to the defendant was because interest on the outstanding loans wasaccumulating and he did not wish to incur more interest:

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Mr Go, isn’t it true that in fact you told Ms Ching that you will send US$1 million to repay partof that loan?

That’s correct.

Why would you do that, Mr Go --

Well, at that time --

-- if you were not responsible for repayment of that loan?

Well, at that time, your Honour, it’s that I told Ms Ching to reverse the loan, and she told meshe cannot, it cannot be done, simply because I have to sell off my assets first before theproceed [sic] can pay off the loan.

Based on this statement, I feel I been keeping paying high interest rate, I’m paying thedefendant, and I’m afraid that the interest might grow bigger and bigger. Since thedefendant has total control of my accounts, they can just deduct the interest rate due anytime they want.

So in order to lessen the interest payment, I have, since I have cash sitting in other banks, Idecided to remit US$1 million to Bakrie (sic) to pay off the loan to lessen the interestpayment.

Mr Go, you decided to remit US$1 million to Bakrie, did you say?

I’m sorry, to the defendant, to the bank. Not Bakrie, to the bank.

The plaintiff’s meeting with Giles and Ms Ching in February 1998 and his participation in theBakrie Notes and Rossiyskiy Notes settlements

61 On 18 February 1998, the plaintiff met with Giles and Ms Ching and he was informed by Gilesthat the Bakrie Group intended to meet with its creditors to discuss a settlement as part of a debt-restructuring exercise. At this meeting, the plaintiff requested Ms Ching to send him more informationabout the Bakrie Group. Subsequently, the plaintiff also signed a letter addressed to the Bakrie Groupdated 20 October 1998 to advise them that he was the beneficial owner of the Bakrie Notes.Subsequently, the plaintiff participated in restructuring talks with the Bakrie Group in a bid to salvagewhatever value was left in the Bakrie Notes. The plaintiff himself met with the chairman of the BakrieGroup, Aburizal Bakrie, sometime in May 1999 at the Shangri-La Hotel in Manila and discussed therestructuring proposal that was being mooted then by the Bakrie Group.

62 After the defendant closed its Singapore branch in 2001, the assets that were held by thedefendant in respect of the Bakrie Notes were transferred to HypoVereinsbank (“HVB”), Singapore,and held in escrow.

63 The Rossiyskiy Notes were sold to ING Barings at a settled amount as part of a rehabilitationarrangement, which was evidenced by a letter dated 8 September 2000 in which the plaintiff wrote tothe defendant regarding the settlement. By then, the plaintiff had already raised the allegations thatthe investments were unauthorised.

The plaintiff raises the allegation that the investments were unauthorised

The plaintiff raises the allegation that the investments were unauthorised

64 Sometime in late 1998, the defendant was involved in a merger and, as a result, the defendantwrote to the plaintiff requesting him to execute a new set of account documentation to reflect thechanges. In his reply dated 28 June 1999, the plaintiff raised, for the first time, the allegation thatthe investments were not within the conservative investment mandate (see [41] above) and askedfor documentary proof of his instructions to the defendant.

65 What followed was a series of exchanges between the plaintiff and Giles of the defendant. In aletter dated 21 July 1999 to the plaintiff, Giles responded to the plaintiff’s allegation with the followingstatement:

Regarding the more general comments in your letter, I would remind you this is a non-discretionary account, which is managed by yourself.

The plaintiff subsequently wrote back in a letter dated 11 August 1999 and alleged that theinvestments made in his account were unauthorised:

You said that I opened a non-discretionary account with you that I managed by myself.Precisely, I wanted to have the information I asked because I believe that your bank invested myfunds in ways that I had not authorized. ...

These exchanges culminated in the plaintiff’s letter dated 15 March 2000 threatening legal actionagainst the defendant for its “mishandling” of his investment accounts.

The unauthorised investments claim: whether the plaintiff had authorised the investments inhis portfolio

It was unlikely that the plaintiff had given the defendant a conservative investment mandate

66 The plaintiff attempted to picture himself as a conservative and risk averse investor who wasproviding for the long-term future of his family. He produced account statements from his other banksclaiming that, before 1997, he had only invested in conservative investments such as treasury billsand promissory notes issued by the Central Bank of the Philippines. However, this claim could not besubstantiated because the statements that he produced gave no indication as to the nature or typeof investments that had been made.

67 In his written statement, the plaintiff also referred to the low-to-medium risk investments heldin his UBS accounts in an effort to demonstrate that he would only acquire low-to-medium riskinvestments. However, when cross-examined, he conceded that he had opened the Singaporeaccount with the defendant because he wanted to pursue a different investment strategy from thelow-to-medium risk investment policy which he had adopted for his UBS accounts. Therefore, theplaintiff failed to produce any credible evidence before me to support his assertion that he had giventhe defendant the conservative investment mandate. Between the evidence of the plaintiff and MsChing, I accepted Ms Ching’s version of events. My conclusion on this point is further substantiatedby the accounts of the plaintiff’s conduct that follow.

The plaintiff’s conduct throughout the relevant period was completely inconsistent with hisclaim that the investments were unauthorised

68 First, I found it incredible that the plaintiff chose not to complain to the defendant as soon ashe had found out that unauthorised investments had been made on his behalf and that loans had

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been made to his account. It was not disputed that Ms Ching had brought and showed the plaintiffaccount statements to update him about his Singapore account at their monthly meetings fromAugust 1997 up till February 1998 (see [44] above). The plaintiff conceded that he had gone throughthe account statements for the Singapore account at the monthly meetings and was, therefore,aware of the securities that were held in that account.

69 Although the plaintiff made an attempt to create an issue out of the fact that he was notshown any statements for the Hong Kong account, he admitted that even without the Hong Kongaccount statements it would have been apparent to him that loans were indeed being drawn down tofinance the purchase of the investments. This was because by August 1997 the plaintiff was alreadyaware that a sum of approximately US$7m worth of investments had already been acquired in hisSingapore account when he had only remitted approximately US$4m to the defendant in July 1997(see [40] above). This could only mean that the balance of US$3m used to purchase the investmentswere financed using loans drawn down from the Hong Kong account.

70 When questioned during cross-examination as to why he did not complain to the defendantabout the unauthorised investments immediately after seeing the monthly statements, the plaintiffgave an excuse that he thought that Ms Ching might have made an honest mistake in purchasingthose investments. Even if that were true, it still did not explain why the plaintiff failed to register hisconcerns with the defendant for well over a year.

71 Another reason that was given by the plaintiff for not complaining upon seeing the accountstatements was that he had insufficient documents to lodge a proper complaint against Ms Ching. Theplaintiff attempted, while on the witness stand, to spin new explanations for requiring moredocuments:

I put to you that if what you are saying is true about all this being unauthorised, youwouldn’t need any documents to prove that because you didn’t authorise; what documentscan there be that you need to prove that you didn’t do something?

Well, I have to -- need the documents to see what is my total loan exposure, when was theloan extended, what are the interest rate, what are the duration, what currency is beinggiven on the loan, because I am totally blank on that.

72 It was completely unbelievable that the plaintiff thought he needed more details before hecould complain that US$7m worth of investments and loans had been made in his name without hisauthorisation. The improbability of it can be likened to a victim whose house is being razed by fire andyet decides to investigate the cause or measure the intensity of the flames instead of calling for helpto extinguish it. Remarkably, the plaintiff obstinately insisted that he needed more exact detailsdespite conceding that such information was irrelevant to his ground for complaint:

Your response is, you need documents to check certain things.

Yes.

One of the things you mentioned is currency.

Yes.

I asked you: if it is in Thai baht compared to US dollars, are you more likely to pay? You said,“No I won’t pay”. So it doesn’t make a difference to you if it is Thai baht or US dollars, right,

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you still won’t pay?

That’s correct.

…

Interest rate of the loans. If the loans were lent to you at 5.125 per cent, as compared to alater loan, which was 6.125 per cent, would you pay the lesser interest rate loan faster?

I still will not pay.

…

Agree or not: a person in your position, who says, “Look, I never authorised any of thesepurchases, I have sent you US$4 million, you have done all these funny things I have nevertold you, I have been complaining for three or four months, now you say I owe you US$4million.”

Right.

Any person in that position won’t care how much the bank says is owing; he will simply say,“I don’t owe you one cent, let alone US$4 million. I don’t care what the dollars and centsamount is, I’m not paying you a cent.” Correct or not?

Correct, but at that point in time I still need some figures to show.

What made it even clearer that all this was merely an afterthought was that the plaintiff, tellingly, didnot request for any documents from the defendant. Ultimately, the plaintiff had to concede that, byNovember 1997, he held, in his possession, sufficient documents to lodge a complaint againstMs Ching.

73 In his written statement, the plaintiff provided a laundry list of reasons for not wanting tocomplain about Ms Ching:

(a) the plaintiff did not wish to be seen as complaining against Ms Ching’s father, who was notonly a distant relative but also a senior and venerated member of the Filipino Chinese community;

(b) the plaintiff believed that Ms Ching was acting in his best interests at that time;

(c) the plaintiff did not wish to sour the new banking relationship between him and thedefendant;

(d) the plaintiff thought that the purchases of the investments could not be reversed and thatthe only way forward was to request Ms Ching to sell them;

(e) the plaintiff was willing to drop the matter if Ms Ching was able to sell the investmentsbecause he adopted a policy of not being unduly confrontational and litigious in businessdisputes; and

(f) the plaintiff was keen in maintaining the secrecy of his investments with the defendant,especially with regard to the Sugarland Trust.

74 I found none of these reasons credible for the reason that it was extremely difficult to acceptthat the plaintiff was willing to risk millions of dollars of his hard-earned money for such superficialreasons.

75 Secondly, not only did the plaintiff choose not to complain until close to two years later, hisactions within that period of time were completely inconsistent with his allegations that theinvestments were unauthorised. In the month of November 1997, the plaintiff had remitted a sum ofclose to S$1m to the defendant for the purpose of servicing part of the loans in his Hong Kongaccount (see [40] above). By then, the plaintiff was already fully aware of the investments that hadalready been acquired in the Singapore account (see [69] above). There was simply no reason for theplaintiff to have repaid the loans in part if he had not authorised those investments. The plaintiff’sexcuse for repaying the loans on the ground that he did not want interest to continue running waspatently unbelievable, in my view. Additionally, after the Asian financial crisis, the plaintiff personallyparticipated in the restructuring exercises and executed settlements for the Bakrie Notes andRossiyskiy Notes, which clearly showed that he accepted the losses suffered on those investments.Indeed, the plaintiff’s conduct was overwhelmingly consistent with that of a person who treated theinvestments as properly authorised.

76 Therefore, I could only come to the conclusion that the investments that were acquired in theplaintiff’s Singapore account were properly authorised.

The defendant’s failure to produce any proper records of clients’ instructions

77 From the evidence, it was clear that there was a systemic problem of abject record-keepingwithin the defendant’s organisation. Even Yin, the senior vice-president of operations, was of theattitude that he had no reason to doubt the defendant’s officers. There was a worrying lack ofcompliance for procedural requirements, and even on the occasions when procedures were compliedwith, it took the form of bare compliance for the sake of formality with no real regard for the purposeof having such safeguards in place. For example, the defendant’s internal documents show that theplaintiff purportedly gave instructions at the exact same time, or 9.00am, on every single occasion. Itwas conceded by Ms Yeung that the times recorded in those internal documents probably did notreflect the actual time that the instructions were received. To provide another example, although itwas standard procedure for a private banking officer to fill in an order form for the trading deskwhenever the officer wished to transact a security, no such order forms were filled by Ms Ching.Similarly, no tape recordings were produced and no proper explanation was given, although phoneconversations were supposed to be recorded as a matter of practice (see [48] above). However,despite these failings, it is my view that Ms Ching, in disclosing the statement accounts to theplaintiff during the monthly meetings, had not acted dishonestly or tried to conceal any evidence fromthe plaintiff.

78 The plaintiff, in asking this court to draw an adverse inference against the defendant and findthat the defendant had failed to discharge the burden of proving that the investments were properlyauthorised, was plainly mistaken, in my view. On this point, the plaintiff’s reliance on the High Courtdecision of Surender Singh s/o Jagdish Singh v Li Man Kay [2010] 1 SLR 428 was also misplaced. Inthat case, the burden of proof was placed on the defendant hospital, NUH, only after the plaintiffshad first raised a prima facie case (at [220]–[221]):

220 I accept the plaintiffs’ submission that pursuant to s 108 of the Evidence Act, the burdenwas on NUH to prove that the Deceased was adequately and appropriately monitored in Ward 43during the crucial period after 1430 hours. As Ms Jasmail only arrived in Ward 43 after 1600 hours,the plaintiffs were not privy to any of the events that took place before her arrival. It would be

disproportionately difficult for the plaintiffs to prove a negative – that the staff of NUH had failedto monitor the Deceased in Ward 43. It was for NUH to show that the Deceased was monitoredduring the period in question.

221 However, a mere allegation by the plaintiffs that the Deceased was not monitored while inWard 43 is insufficient to invoke s 108 of the Evidence Act. The plaintiffs must first establish aprima facie case against NUH that the Deceased was not monitored. As stated in Woodroffe andAli, Law of Evidence (([141] supra) at p 4225):

It is not the law that the plaintiff ... has to eliminate all possible evidence or circumstanceswhich may exonerate the defendant ... If the facts are within the knowledge of thedefendant ... then he has to prove them. Of course, the plaintiff ... has to establish a primafacie case in the first instance, that is, to establish facts which give rise to a suspicion. Ifthis is done, [then] by reason of [s 108 of the Evidence Act], the burden is thrown on thedefendant ...

[emphasis added]

[emphasis in original]

In the present case, I have already determined at [76] above that there was sufficient evidence ofthe plaintiff's own conduct before me to find that the investments were properly authorised. Theplaintiff’s failure to raise even a prima facie case meant that the defendant did not have to bear theburden of proving that the investments were authorised. Similarly, there was no room for me to drawan adverse inference against the defendant for failing to produce any tape recordings.

The advisory claim: whether the defendant owed the plaintiff a contractual and/or tortiousduty to advise him as to the investments in his portfolio

The law

79 The question whether a private bank owes a duty to its clients to give investment advice hasreceived a fair bit of judicial attention lately. The judgment by Mrs Justice Gloster (“Gloster J”) of theEnglish High Court in JP Morgan Chase Bank v Springwell Navigation Corporation [2008] EWHC 1186(“Springwell”) conveniently sets out the relevant legal principles and factors that the court has toconsider in arriving at its decision. Springwell has recently been cited with approval in the SingaporeHigh Court decision of Crédit Industriel et Commercial v Teo Wai Cheong [2010] SGHC 155 (“CIC”).

80 In Springwell, the client by the same name (an investment vehicle owned by the Polemis family)brought a counterclaim against the plaintiff bank, Chase, in contract and in tort after it sufferedlosses to its portfolio as a result of the Russian financial crisis. Taking Lord Hoffmann’s cue in Customsand Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 at 199 to develop “lower-levelprinciples which could be more useful than the high abstractions commonly used in such debates”,Gloster J identified the following “lower level” factors that serve as indicators of the existence orotherwise of any contractual or tortious duty of care (at [53]):

i) the contractual context (including the terms of the relevant contractual documents anddisclaimers, and the absence of any written advisory agreement);

ii) what, if anything, was said to AP [of the Polemis family] by Chase representatives when hewas introduced to JA in 1987/1988;

iii) the actual role played by JA (including the purpose for which he was giving APrecommendations or advice) over the relevant period 1987–1998;

iv) the actual role of the Shipping Department [of Chase] in the period 1987-1990, and,subsequently, the Private Bank [of Chase], in the period 1990–1994;

v) the extent of AP’s financial experience or sophistication;

vi) the extent of AP’s reliance on JA [an employee of Chase], CMB, CIBL and CMIL, includingthe extent to which it was foreseeable that he would rely upon them for the investment adviceSpringwell alleges it should have been given; and

vii) the regulatory background.

81 It must first be noted that Gloster J’s analysis proceeded on the basis that Springwell’s claims incontract and in tort overlapped completely. Counsel for Springwell had agreed that the concurrentduties alleged by Springwell were concomitant and co-extensive, and as a result, Gloster J dealt withboth the claims in contract and tort as a single issue and held that (Springwell at [47]):

... an analysis of the relationship between the parties, by means of an objective analysis of therelevant facts relating to the dealings between the parties in the relevant contextual scene,therefore informs the court both whether a contractual duty and a tortious duty of care exist.[emphasis added]

82 Since the House of Lords’ decision in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145(“Henderson”), it is now trite law that out of the same contractual context, a general duty of carecan arise as a concurrent tortious duty co-existing with the contractual duty. The relationshipbetween concurrent duties owed in contract and tort, however, is a very close one. In Henderson,the House of Lords applied the principle established in Hedley Byrne & Co Ltd v Heller & Partners Ltd[1964] AC 465 that an assumption of responsibility coupled with reliance may give rise to a tortiousduty of care (the “Hedley Byrne principle”) and held that such a duty can exist concurrently with anexisting contractual duty, so long as the latter does not limit or exclude the former.

83 The significance of the contractual relationship in determining the scope of any duty of careowed in tort was emphasised by the editors of Jackson & Powell on Professional Liability (Sweet &Maxwell, 6th Ed, 2007) (“Jackson & Powell”) at paras 2-110 and 2-111:

(v) Can the Concurrent Duty in Tort be More Extensive than the Contractual Obligations?

2–110 As a matter of principle, if the contract of retainer governs the whole of the parties’relationship, the answer should be no. If, however, the contract governs only part of theparties’ dealings, in other aspects of the parties’ mutual activities there may be a tortious duty ofcare but no parallel contractual obligation … In any particular case, it will be important toestablish whether the professional in effect undertook some further task or gave someadvice beyond that which he had contracted to give.

(vi) Further Significance of the Contract

2–111 Absent some act or advice beyond the scope of his contract, it is in the contract

between the professional and his client that the extent of his tortious duty will be found.His tortious duty of care will be no greater in scope than the implied contractual promise toexercise reasonable skill and care. Moreover, the contract can have greater significance: bydefining what the professional is to do, it may explain the scope of his responsibility andthe extent to which responsibility or risk is to rest with his client or is to be borne byothers.

[emphasis added in bold]

84 To summarise, if there was an assumption of legal responsibility whereby one party undertakesto perform a task or service for another, the contract may modify or exclude the scope of anyexisting tortious duties arising out of that assumption of responsibility. However, if there was noassumption of responsibility by either party, the contract will generally be completely determinative ofthe scope of the parties’ duties. This position appears to be borne out from the authorities thatfollow.

85 In Springwell ([79] supra), the relationship between Springwell and Chase was governed by anumber of contracts spanning a period of ten years. Although the contractual terms found in theindividual agreements did not purport to cover the entire breadth and timeframe of that relationship,Gloster J held, nevertheless, that the terms found in the principal agreements were evidence of awider course of dealing that governed their relationship as a whole (at [477]). Gloster J cited theHouse of Lords’ decision of Henderson ([82] supra) and held that the contractual terms which hadbeen found to govern the entirety of dealings between the parties negated any possibility of anadvisory duty coming into existence (at [474]–[475]):

474. It was common ground that, in determining whether the circumstances are such as toimpose a duty of care, an important factor is the way in which the parties have sought toregulate their relationships, and to allocate risk, by contract. If the parties havecontractually defined the terms upon which they will conduct business, then that may in thenormal case provide a clear and often determinative indication as to the non-existence of anywider tortious duty. In Henderson v Merrett Lord Browne-Wilkinson said:

‘The existence of a contract does not exclude the co-existence of concurrent fiduciaryduties (indeed, the contract may well be their source); but the contract can and doesmodify the extent and nature of the general duty that would otherwise arise.

In my judgment, this traditional approach of equity to fiduciary duties is instructive whenconsidering the relationship between a contract and any duty of care arising under theHedley Byrne principle (of which fiduciary duties of care are merely an example). Theexistence of an underlying contract (e.g. as between solicitor and client) does notautomatically exclude the general duty of care which the law imposes on those whovoluntarily assume to act for others. But the nature and terms of the contractualrelationship between the parties will be determinative of the scope of theresponsibility assumed and can, in some cases, exclude any assumption of legalresponsibility to the plaintiff for whom the defendant has assumed to act

...

I can see no good reason for holding that the existence of a contractual right is in allcircumstances inconsistent with another tortious right, provided that it is understood thatthe agreement of the parties evidenced by the contract can modify and shape the tortious

duties which, in the absence of contract, would be applicable.’

475. In my judgment the various terms of the principal contractual documents upon which Chaserelies (i.e. the Relevant Provisions), and which I have set out above, clearly show that Springwelland Chase were dealing with each other on a stipulated and accepted basis that, whateveradvice or recommendations may have been given by Chase in the course of their tradingrelationship (i.e. the sale by CIBL/CMIL to Springwell of emerging markets securities, and thefinancing by CMB of various of Springwell’s purchases), no obligations to give appropriateinvestment advice, or duties of care as an investment advisor, were being assumed by either thePrivate Bank, CMB, or the Investment Bank, as the entity actually selling Springwell the relevantsecurities, (i.e. CIBL or CMIL), whether in relation to Springwell’s emerging markets portfolio or,more generally, as to what Springwell should do, given the existence of that portfolio. Thus Iaccept the submissions made on behalf of Chase that the contractual documentation,whether taken at a straightforward contractual level, or looked at more widely, as anindication as to whether any common law duties of care arose, showed that the partiesspecifically contracted upon the basis of a trading and banking relationship which negatedany possibility of a general or specific advisory duty coming into existence.

[emphasis added in bold]

86 An example where a contractual term excluded the scope of any concurrent tortious duty canbe found in the recent English decision IFE Fund SA v Goldman Sachs International [2007] 2 Lloyd’sRep 449. Waller LJ, sitting in the Court of Appeal, referred to the judgment of Toulson J below withapproval and held that the contract between the parties, who were both commercially sophisticated,excluded any scope for imposing a duty to advise on the bank, Goldman Sachs. In that case, GoldmanSachs successfully relied on an “Important Notice” which contained standard terms expressly statingthat it had not independently verified the information set out in a Syndication InformationMemorandum and that it accepted no responsibility for the accuracy or completeness of theinformation (at [17] and [28]):

17. [Toulson J] held that there was no duty of care as alleged, and did so in these terms:

6 3 . The mezzanine syndication involved a number of interlocking contractualrelationships giving rise to rights and obligations defined in documents drafted byspecialist lawyers. In such circumstances the court should be very slow tosuperimpose any obligations in negligence going beyond those carefully defined inthe contractual documentation.

64. Goldman Sachs was not acting as an adviser to IFE or purporting to carry out anyprofessional service for IFE, as the terms of the SIM made plain. It was acting for thesponsors and not on behalf of the recipients of the SIM. In general a party involved innegotiations towards a commercial venture owes no positive duty of disclosure towardsanother prospective party. A duty of disclosure may be undertaken, but no such duty wasundertaken in this case either expressly or impliedly. The expression ‘assumption ofresponsibility’ has on occasions been used in cases where it would be more accurate tospeak of the court imposing a responsibility, but I can see no ground on which it would befair to impose on Goldman Sachs the duty of care contended for by IFE.

…

28. I can start by clearing one or two issues out of the way. First it seems to me that the

argument that there was some free-standing duty of care owed by GSI to IFE in this caseis in the light of the terms of the Important Notice hopeless. Nothing could be clearer thanthat GSI were not assuming any responsibility to the participants: Hedley Byrne v Heller &Partners [1964] AC 465. The foundation for liability for negligent misstatementsdemonstrates that where the terms on which someone is prepared to give advice ormake a statement negatives any assumption of responsibility, no duty of care will beowed. Although there might be cases where the law would impose a duty by virtue of aparticular state of facts despite an attempt not ‘to assume responsibility’, therelationship between GSI either as arranger or as vendor would not be one of them. Ientirely agree with [Toulson J] on this aspect …

[emphasis added in bold]

87 In the more recent decision of Titan Steel Wheels Ltd v The Royal Bank of Scotland plc [2010]EWHC 211 (“Titan Steel”) Steel J was of the opinion that the scope of the obligations owed by thebank to its client were fully defined in the contractual terms (at [81], [82] and [85]):

81. These terms expressly provided that the Bank would not provide advisory services and thatany opinions expressed by the Bank did not constitute investment advice. Titan was to takeindependent advice as might be necessary. In that sense the Bank was making it clear that itwas only providing an execution service.

82. The specific terms of each transaction, both as contained in the post transactionacknowledgements and the confirmations were to the same effect. In particular:

i) Titan was to seek independent advice if required.

ii) Titan placed no reliance on the Bank for advice or recommendations ‘of any sort’.

…

85. I turn to the impact of these terms. In this regard there was some confusion in Titan’s caseas to whether it was alleging a pre-existing duty of care at the time the products werepurchased or that the Bank assumed a duty of care in respect of Ms Plested’s ‘advice’. But oneither basis, I conclude that the terms outlined, taken as whole, are only consistent withthe conclusion that Titan and the Bank were agreeing to conduct their dealings on thebasis that the Bank was not acting as an advisor nor undertaking any duty of careregardless of what recommendations, suggestions or advice were tendered.

[emphasis added in bold]

88 Finally, in the Singapore decision of CIC ([79] supra) (see [79] above) Philip Pillai JC decidedthat the question whether a private bank owes a duty to advise its client will ultimately depend onthe contract and the conduct of parties (at [2], [83] and [84]):

2 The present case raises a core question of law about private banking and sophisticatedclients. When is a private bank acting as a trusted advisor of its client and when is it not? Theanswer to this question of law falls to be determined by the particular contractualdocumentation and conduct adduced in evidence in each case.

…

83 I now return to the core question of law about private banking and sophisticated clientsraised in [2] in the light of the relevant contractual documents and the evidence adduced in thisdispute:

When is a private bank acting as a trusted advisor of its client and when is it not?

84 A private bank is not acting as a trusted advisor of its client when (a) its account openingform and Risk Disclosure Statement highlight to the client that he is responsible for the risks in histransactions and recommends that he takes advice from other professional advisers, including hisaccountants, lawyers and tax advisors, and further that the bank does not makerecommendations or give advice and (b) this is borne out by the evidence of conduct.

[emphasis added]

89 It is thus clear from the authorities that the court will not lightly find the existence of anadditional duty within a banking relationship that is already governed by contract unless there isconduct amounting to an assumption of responsibility coupled with reliance under the Hedley Byrneprinciple ([82] supra).

90 As the plaintiff has claimed that the defendant owed concurrent and co-extensive duties inboth contract and tort to advise him as to the prudence of his investment portfolio, I gratefully adoptthe “lower level” factors formulated by Gloster J in Springwell in so far as they are relevant to thepresent case and list them as follows:

(a) the extent of the plaintiff’s financial experience and sophistication;

(b) the contractual context;

(c) the actual role played by Ms Ching (including the purpose for which she was giving theplaintiff recommendations); and

(d) the extent of the plaintiff’s reliance on Ms Ching.

Whether the plaintiff was an inexperienced and unsophisticated investor

91 The plaintiff attempted to give the impression that he was an inexperienced andunsophisticated investor who relied heavily on others for investment advice. He did so by callingattention to his three existing UBS investment accounts, of which one was an advisory account andthe other two were discretionary accounts, to support his claim that he was incapable of makinginvestment decisions and managing his own investments. I found this submission difficult to accept onthe plaintiff’s own evidence.

92 In my judgment, whether or not a particular client is a sophisticated one depends on theparticular factual matrix concerned. In the present case, the investments forming the subject ofdispute were simply corporate and sovereign-linked bonds which, in my view, were simple securitiesthat could easily be understood by someone with the plaintiff’s knowledge and experience. Theplaintiff, who was also a successful and wealthy businessman, clearly understood the types of riskinvolved, such as default risk and exchange-rate risk. Not only that, the plaintiff was shrewd enoughto move his funds out of the peso in early 1997 in anticipation of its devaluation.

93 The plaintiff also conceded that he had sufficient knowledge of investment principles to make

the investment decisions for his UBS advisory account and, therefore, had no problems rejectingUBS’s recommendations. Indeed, it was the plaintiff’s own evidence that he relied on UBS’srecommendations simply to offset his lack of knowledge of the type of investments that wereavailable in the market. Similarly, in his relationship with the defendant, the plaintiff had no difficultyrejecting Ms Ching’s recommendations when he thought that they were too risky.

94 I therefore find that, in the particular context of the present case, the plaintiff was not aninexperienced and unsophisticated client who had to rely entirely on the defendant for advice relatingto the management of his investment portfolio.

Whether the contractual terms imposed a duty on the defendant to act as the plaintiff’sinvestment advisor

95 I begin by noting that none of the contractual terms expressly provide for an advisoryrelationship between the parties. Mr Ramesh argued that, nevertheless, a duty to advise ought to beimplied into the contract.

96 The first argument by Mr Ramesh for implying such a duty was that the very nature of a privatebanking relationship ought to give rise to an implied duty on the private banker’s part to advise acustomer on investments. The reason given was that the private banking relationship is a specialrelationship whereby the bank holds itself out as having the requisite experience to chart a successfulcourse of judgment to a high net-worth individual who entrusts a portion of his wealth to the privatebank and relies on the bank’s judgment and advice.

97 In my view, this line of argument was based not on contract as argued by Mr Ramesh but onthe twin criteria of voluntary assumption of responsibility and reliance, which are essential factors inmeeting the test of proximity for establishing a prima facie duty of care in law (see SpandeckEngineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 (“SpandeckEngineering”) at [81]), and accordingly, I will address this argument in a later part of my judgment.

98 The next argument by Mr Ramesh was that the parties had agreed for the Singapore account tobe an advisory account, and thus the defendant owed a continuing duty to the plaintiff to giveinvestment advice related to his portfolio. To establish this, Mr Ramesh relied on the followinggrounds:

(1) there were no express terms negating the duty to advise;

(2) the manner in which the contractual documentation was executed;

(3) the fact that the plaintiff was charged an account fee; and

(4) the fact that the defendant’s representatives had endorsed the existence of a duty toadvise.

99 As there are no express terms providing for a duty to advise, Mr Ramesh sought to establishthat there was significance in the order in which the contractual documents were executed (theplaintiff had executed the DIMA before executing the IAI). Mr Ramesh argued that the effect ofexecuting the DIMA first was that the defendant owed a duty to use its discretion to source for andselect appropriate investments on behalf of the plaintiff, taking into account his risk profile and theeconomic circumstances. The subsequent execution of the IAI merely revoked the defendant’s powerto make investment decisions on behalf of the plaintiff, without relieving the defendant from its

continuing duty to recommend suitable investments under the DIMA.

100 I certainly find nothing controversial in the submission that the defendant was obliged tosearch for and recommend suitable investments. In fact, the evidence suggested that they hadproceeded on that very basis. But it does not necessarily follow from there that parties had agreedfor the defendant to continually give investment advice to the plaintiff. In my opinion, it is one thingto require the defendant to recommend securities that were available in the market and within theplaintiff’s risk appetite, and it is quite another to require the defendant to continually give wide-ranging advice with regards to the portfolio and recommend investment decisions such as when totrade or hold on to particular securities. The mere duty to recommend securities, in my view, certainlydoes not, without more, give rise to a further and continuing duty to give advice with regards to themanagement of the investment portfolio. In arriving at this decision, I find some support fromSpringwell ([79] supra) at [108]:

… All that Springwell was being offered, through AP being given access to JA, was the provisionof an alternative product to time deposits. Moreover, such personal recommendations, or advice,as AP was being given by JA – at least at this early stage – about the products that CIBL, by JA,was offering to sell (mainly ECP), has to be viewed, in my judgment, as no more than therecommendations of a trader to a buyer as to what was available, on what terms, and perhapsalso as to the respective merits of the products on offer, given the requirements of theparticular client. It may well be that, theoretically, in such circumstances, a low level duty ofcare would arise on the part of the salesman not to make any negligent misstatements, or evento use reasonable care not to recommend a highly risky investment without pointing out that itwas such, but a low level duty along those lines is worlds away from the wide duty of care thatwas pleaded or relied upon as having arisen at this early stage. In Mr. Brindle’s words, it was atthe lower end of the spectrum. Thus the notion that, in the context of the trading relationship atthis early stage, as a result of the manner in which JA was introduced to AP, CIBL and/or CMB, byJA had either an obligation to ascertain Springwell’s investment criteria, or to give wide rangingadvice, for example, about portfolio diversification or concentration issues, or in relation to thegeneral composition of the portfolio as a whole, is one that, in my judgment, simply does notreflect the reality of the position.

[emphasis added]

101 Equally damaging to the plaintiff’s argument was the evidence of his own conduct. Indeed, theplaintiff himself was of the view that the account was to be completely managed by him, as evidentfrom his letter to the defendant dated 11 August 1999 in which he conceded that the Singaporeaccount was non-discretionary and that he would be managing his own portfolio (see [65] above).Furthermore, at no point in time during the entire relationship did the plaintiff ask Ms Ching for heropinion with regards to the investments that were already in his portfolio. One would have thoughtthat, in the midst of the uncertainty during the Asian financial crisis, a client who had contracted foradvisory services would have hurriedly sought professional investment advice from his contractedadvisor. It was unbelievable that the plaintiff simply sat back and made no request for advice had heactually contracted for advisory services from the defendant.

102 The plaintiff also sought to characterise the account fee as being consideration for investmentadvice. He argued that because the defendant still charged a fee, despite having executed the IAI, itmust have been intended as consideration for providing advisory services. The plaintiff even went sofar as to claim that there was no other reason for him to pay the defendant quarterly fees. I was notpersuaded by this argument. The fee payable can be found in cl 16.01 of the AOCA, which was anagreement that was executed whenever an account was opened with the defendant, regardless of

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whether it was a discretionary account or not. This meant that the fee was charged by thedefendant for simply acting as the custodian of the assets held in a client’s account and not for themanagement of those assets. This was evidenced in the Preamble, read with cll 16.01 and 20 of theAOCA:

[The plaintiff] wish[es] to open accounts with [the defendant] and to hold in such accounts for[himself] any cash, term deposits, securities, deeds, documents, and other properties now orhereafter deposited with or transferred to you or to any third party nominated by [the defendant]for the purpose.

…

16.01 A fee shall be payable to the Bank amounting to one .25 percent per annum, which feeshall be charged per quarter or part thereof, in arrear, based on the total market value, asreflected in the Bank’s statement of account, of all the assets held by the Bank in relation tothese accounts on the relevant Quarter Day or the day upon which the accounts are closed ifother than on a Quarter Day.

20. … The [defendant] shall not be responsible for the management of any Investments, or forany diminution in the value of the Investments.

[amendment in original]

The argument by the plaintiff that the fee was for advisory services was plainly unsupported by theobjective documentary evidence and I rejected it accordingly.

103 Mr Ramesh then attempted to rely on a statement that was made in these proceedings by aDr Karl Tambornino (“Dr Tambornino”), general counsel for the defendant. Mr Ramesh argued that thestatement amounted to an admission on the defendant’s part that it was under a duty to advise. Thisstatement can be found in para 6 of his affidavit filed for an earlier stay application in favour of theHong Kong courts on 24 October 2005 (“the Affidavit Statement”), which reads:

The core element of the business relationship between the Plaintiff and the Defendant is therendering of investment advice and investment management, respectively, in Hong Kong. Whileinvestments may have been carried out on the Plaintiff’s behalf through the conduit of theSingapore Account, the actual investment advice and investment services that were carried outon behalf of the Plaintiff was performed by a Private Banking business subsidiary of the Defendantbased in Hong Kong, pursuant to Articles [sic] 9 of the DIMA and IMA, respectively.

Mr Ramesh had also referred Yin to Dr Tambornino’s Affidavit Statement during cross-examination inan attempt to extract a concession that the duty to advise was a core element of a private bankingrelationship. However, Yin pointed out that any such duty would fall to be defined by the contractualdocuments:

What Dr Tambornino is saying is that it is a fundamental principle or fundamental basis of therelationship between the plaintiff, Mr Go, and the bank that the defendant would renderinvestment advice and investment management in relation to the account?

Correct.

Would you accept that proposition that Dr Tambornino makes in paragraphs 6 and 7, that it is

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a fundamental basis of the relationship between the plaintiff and the defendant that thedefendant would offer investment advice and investment management services in relation tohis accounts?

Correct.

You accept that?

Yes.

That was your understanding of the relationship between Mr Go and the bank?

As far as I can remember, yes.

Right?

As far as I can remember.

You have no reason to disagree with paragraphs 6 and 7 of the affidavit?

I can’t remember exactly the nature of the account opening.

I understand. But you would accept that, based on what Dr Tambornino has said, you haveno reason to disagree with what he is saying is [sic] paragraphs 6 and 7?

No, because I would suspect that he would have had supporting documents to say what he’ssaying.

104 In my view, the plaintiff has placed far too much significance on Dr Tambornino’s AffidavitStatement. First, Dr Tambornino’s Affidavit Statement must be read in the context of the applicationfor which it was made, which was for a stay of proceedings on the ground of forum non conveniens.Furthermore, Dr Tambornino had simply acknowledged that there was a duty to give investmentadvice but he did not venture to define the scope of that duty. The precise scope of the duty toadvise, as correctly pointed out by Yin, falls to be defined by the contract (subject to any dutyarising from the Hedley Byrne principle ([82] supra) which will be addressed separately below). Asmentioned at [100] above, the evidence suggests that parties had proceeded on the basis that thedefendant was under a duty only to recommend suitable investments to the plaintiff.

105 Finally, Mr Ramesh sought to distinguish the present case from the cases cited from [79] to[88] above on the basis that the banking relationships in those cases were governed by expressterms and disclaimers that negated the duty to advise. For convenience, I shall categorise thematerial contractual terms that were present in the cases cited above:

(a) the bank was not making any recommendation or giving any advice to the client or actingas an adviser (CIC ([79] supra) at [19]; Titan Steel ([87] supra) at [30]; IFE Fund (([86] supra)at [13]; Springwell ([79] supra) at [210]); and

(b) the client would seek his own independent advice (CIC at [19]; Titan Steel at [30]).

106 Although the plaintiff was right to point out that no such terms can be found in the presentcase, I was not persuaded that this difference was critical. Each agreement has to be construed onits own terms. In the present case, the parties had executed the DIMA first before subsequently

executing the IAI. As the DIMA was the standard term agreement for opening a discretionary accountwhich was managed solely by the bank. It was only natural that there were no disclaimers orcontractual terms negating any duty to advise to be found in it as there was no need to provide forthat.

107 Accordingly, my conclusion is that there was no contractual duty on the defendant to continueto provide investment advice to the plaintiff after it had recommended investment products that wereavailable in the market to the plaintiff.

The actual role played by Ms Ching and the extent of reliance the plaintiff placed on her

108 As mentioned earlier at [97] above, the fulfilment of the twin criteria of voluntary assumptionof responsibility and reliance will give rise to a prima facie duty of care under the Hedley Byrneprinciple. To determine whether these criteria have been met, it would be necessary to examine theactual role that was played by Ms Ching and the extent to which the plaintiff had relied on her.

109 As already established, Ms Ching had provided recommendations of investments to the plaintiffat the monthly meetings. At most, this would give rise to the sort of low-level duty of care, asdefined by Gloster J, not to “make any negligent misstatements, or even to use reasonable care notto recommend a highly risky investment without pointing out that it was such” (at [100] above).However, during cross-examination, the plaintiff conceded that he had not relied on any of Ms Ching’srecommendations. This was for the obvious reason that any admission of reliance would fly contraryto his primary case that the investments were unauthorised. Accordingly, the plaintiff cannot nowcomplain that his losses were the result of the defendant’s failure to take reasonable care and skill inmaking those recommendations.

110 Both sides also accepted that Ms Ching did not provide any other form of advice to theplaintiff. That being the case, there was no ground for the plaintiff to argue that the defendant hadvoluntarily assumed any responsibility for giving investment advice to the plaintiff on an ongoing basis.The plaintiff also conceded that the investments in the Singapore account during the Asian financialcrisis were not held in reliance upon any advice.

111 As a result, I concluded that the defendant owed no duty of care in tort to give investmentadvice to the plaintiff.

The expert evidence

112 Having concluded that the defendant owed no duty in contract or tort to give investmentadvice to the plaintiff in relation to the investments that were held in the Singapore account, therewas no need for me to consider the expert evidence and make a determination on the scope of abank’s duty to give investment advice during the Asian financial crisis.

Conclusion

113 For the foregoing reasons, I dismissed the plaintiff’s action with costs to be taxed unlessagreed.

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